Russia finally agrees to supply gas to Ukraine and EU from October to March

Russia has initialed a crucial energy supply deal with Ukraine and the European Union that will see resumption of gas supplies to Ukraine during the winter months. The gas talks were hanging fire because of differences in pricing and also overshadowed by the politics of the conflict in Ukraine. Moscow had suspended gas supplies to Ukraine in July, seeking pre-payment for supplies to the state owned entity, Gazprom.

According to European Commission’s vice president for energy, Maros Sefcovic, the preliminary deal is a crucial step and will ensure gas supplies for Ukraine from October to March and also guarantee onward deliveries to Europe.

“We just initialled a trilateral agreement for the upcoming winter,” Sefcovic said after six hours of talks with the Russian and Ukrainian energy ministers in Brussels on Sep. 25. Sounding confident that the agreement will soon be confirmed and smoothly implemented, Sefcoic tweeted that the deal as a “major achievement.”

Ukrainian Energy Minister Volodymyr Demchyshyn told reporters that “commercial conditions” put forth by Russia were acceptable and the deal will be signed shortly. But he noted, the trilateral gas agreement has only been “initialled.”

“The document has not been signed,” noted Demchyshyn, adding that all three parties agreed that a “specific procedure” will be required, the EU Observer reported. “The document will require further procedure to be signed … I am sure that we will be able to complete it shortly,” he added.

Russian Energy Minister Alexander Novak said: “We will spare no effort to avoid any issues, problems." The minister also highlighted the liberal stand of Russia in gas pricing. He said Moscow offered a cut of "about $20 (AU$28)" per 1,000 cubic metres from the provisionally set price of US $252 (AU$361.19).

Sefcovic promised that the European Commission would try to arrange international financing to help Ukraine in its winter gas purchases. “At least $500 million (AU$716 million) should be available by the end of this year,” he said.

The CNBC reported that the deal has brought the relief that there will be no disruptions in gas supply as happened n 2009.

Financing for Ukraine

Meanwhile, the progress made on the deal hinged on the efforts made by the European Commission in tapping European and international financial institutions, for the necessary financing required for gas purchases by Ukraine, during the winter period. The EC ensured at least US$500 million of finance to be available by the end of the year, Russia Today reported quoting a statement from the European Commission.

The Wall Street Journal reported that the tentative deal became possible after a $1 billion (AU$1.43 billion) financing package provided by international financial institutions led by the World Bank. The assured financing helped Ukraine and its energy giant OAO Naftogaz in going ahead with the plan to fill up its natural gas-storage facilities.

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